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Tue Oct 08, 2013 at 04:27 PM PDT
If GOP Forces a Default, Americans' Wealth Could Be Cut in Half
This time, it really is different.
" believe that — as in the past — the fiscal showdown will end with a midnight compromise that avoids both default and a government shutdown," warned Nouriel Roubini on Sept. 1. "But investors seem to underestimate how dysfunctional U.S. national politics has become. With a majority of the Republican Party on a jihad against government spending, fiscal explosions this autumn cannot be ruled out."
Analysts have been chirping throughout this crisis that the chance of a default is "zero percent." That hasn't stopped them from calculating what the impact would be, and as the deadline approaches they are suddenly showing more interest in running the scenarios. Here's what could happen to your 401K, your IRA, or your kids' college funds if the Republican Party forces the United States to miss a single interest payment:
In a note to clients on Friday, Deutsche Bank's David Bianco wrote that he too saw a zero percent chance that the debt ceiling debate reaches the point where Treasury actually runs out of money and starts missing interest payments.
The language from Wall Street's experts reflect absolute certainty that the U.S. will survive the ongoing debate over the debt ceiling.
However, "zero percent" is the type of language that should set off warning sirens.
Interestingly, Bianco estimated that should the zero-percent scenario occur, the S&P 500 could crash to 850, about a 50% drop.
What's frightening about Bianco's forecast is not the scale of the decline. Rather, what's frightening is that he would go out of his way to present a scenario that had a "zero percent" chance of happening. Because zero represents an impossibility, in theory it couldn't qualify as a worst-case.
On the day Lehman Brothers collapsed, the S&P suffered the worst decline since the September 11th attacks. That drop was a mere 23% from the one-year high the previous October. Still, stocks lost half of their value.
A 50 percent drop in the S & P would, roughly speaking, cut the accumulated wealth of millions of Americans by half--or possibly more.
What that means in the real world is that if you spent thirty years building a nest egg, the last ten or so--thanks to the Republican Party--would have been wasted.
Put another way, if you saved up enough to send two children to college, thanks to the Republicans, now you will have the money to send only one.
That 4 bedroom house you wanted to buy? Thanks to the Republicans, you'll now be able to afford only 2-3 bedrooms. If you can afford the down payment, that is. Hope your kids like bunkbeds!
And the interest rate on your mortgage? Thanks to the GOP, that'll be around 10 percent, if you're lucky.
If you're ready to retire, thinking you've saved up enough of a nest egg, well, sorry. Thanks to the Republicans, you'll be working another 10-15 years. If you're able to, that is.
If you're looking for a job, good luck. Thanks to the Republicans, no one will be hiring, because no one will be buying anything.
As News and World Report notes,
Fewer customers, meaning less income, meaning less need for workers, which could mean Jane's hours get cut...or that, eventually, she would get cut altogether.
On a broader scale, says Faucher, this kind of cycle could wreak havoc nationwide.
" could very well push the economy back into recession: large job losses, big increases in unemployment, all of those things," he says. "People can't borrow. People won't be able to buy or sell homes, people won't be able to buy cars. ... All those factors will restrain growth."
A survey by Gallup showed that Americans’ confidence in the US economy plunged after the government shutdown. The Gallup index now stands at its lowest level since December 2011.
That's after the shutdown. What do you think will happen to consumer confidence after a default?
As Diaried here by JML9999 and reported by Think Progress, some banks have begun to stuff ATM's with cash in anticipation of a potential run on banks by people desperate for cash.
With just 10 days left to raise the debt ceiling and congressional Republicans threatening to force the government to default on its obligations, banks are taking some dramatic steps to prepare for the economic chaos that would result should the brinkmanship continue.
The Financial Times reports that one major U.S. bank has started stuffing its automatic teller machines with extra cash in preparation for a possible bank run from panicked depositors. The New York Times reports that another bank is weighing a plan to advance funds to customers who rely on Social Security and other government payments that could stop in the event of a default.
No one will be able to say they :
Anyone who remembers the collapse of Lehman Brothers Holdings Inc. little more than five years ago knows what a global financial disaster is. A U.S. government default, just weeks away if Congress fails to raise the debt ceiling as it now threatens to do, will be an economic calamity like none the world has ever seen.
Failure by the world’s largest borrower to pay its debt -- unprecedented in modern history -- will devastate stock markets from Brazil to Zurich, halt a $5 trillion lending mechanism for investors who rely on Treasuries, blow up borrowing costs for billions of people and companies, ravage the dollar and throw the U.S. and world economies into a recession that probably would become a depression. Among the dozens of money managers, economists, bankers, traders and former government officials interviewed for this story, few view a U.S. default as anything but a financial apocalypse.
And the predictions of the "zero percenters?" Well as it turns out, they're just making the default scenario more likely:
Nobody believes the country will actually exceed the debt limit — which is exactly why it might.
Oddly enough, despite all the predictions of panic, the stock market was down only marginally over the last couple of sessions.
Here’s the perversity of Wall Street’s psychology: The more Wall Street is convinced that Washington will act rationally and raise the debt ceiling, most likely at the 11th hour, the less pressure there will be on lawmakers to reach an agreement. That will make it more likely a deal isn’t reached.
The real problem with comparing a default scenario to past economic crises is that with a default, the wealth would not be coming back. The markets--and economy--would remain paralyzed for the foreseeable future.
If this really had a "zero percent" chance of happening, then there would be no need for Goldman Sachs to write:
If the debt limit is not raised before the Treasury depletes its cash balance, it could force the Treasury to rapidly eliminate the budget deficit to stay under the debt ceiling. We estimate that the fiscal pullback would amount to as much as 4.2% of GDP (annualized). The effect on quarterly growth rates (rather than levels) could be even greater. If this were allowed to occur, it could lead to a rapid downturn in economic activity if not reversed very quickly.
"Rapid downturn" is a euphemism for "Depression."
Posted by FourScore | Wed Oct 9, 2013, 01:54 AM (6 replies)
Mint the damn coin and let's be done.
Posted by FourScore | Tue Oct 8, 2013, 10:10 AM (57 replies)
So, Imagine that the company you work for held a poll, and asked everyone if they thought it would be a good idea to put a soda machine in the break room. The poll came back, and the majority of your colleagues said “Yes”, indicating that they would like a soda machine. Some said no, but the majority said yes. So, a week later, there’s a soda machine.
Now imagine that Bill in accounting voted against the soda machine. He has a strong hatred for caffeinated soft drinks, thinks they are bad you you, whatever. He campaigns throughout the office to get the machine removed. Well, management decides “OK, we’ll ask again” and again, the majority of people say “Yes, lets keep the soda machine.”
Bill continues to campaign, and management continues to ask the employees, and every time, the answer is in favor of the soda machine. This happens, lets say… 35 times. Eventually, Bill says “OK, I’M NOT PROCESSING PAYROLL ANYMORE UNTIL THE SODA MACHINE IS REMOVED”, so nobody will get paid unless management removes the machine.
What should we do???
Answer: Fire Bill and get someone who will do the fucking job.
Bonus: Bill tells everyone that he was willing to “Negotiate”, to come to a solution where everyone got their payroll checks, but only so long as that negotiation capitulated to his demand to remove the soda machine.
Bill is a fucking jackass.
-Brian Krewson via themetricruler
Posted by FourScore | Tue Oct 8, 2013, 12:18 AM (1 replies)
Mon Oct 07, 2013 at 07:25 PM PDT
Wash Post Editorial Board - Republicans Accomplished Nothing with Shutdown So Far
by night cat
Normally, I am not a big fan of The Washington Post Editorial Board. They tend to be too centrist for me and tend to encourage the parties to work together even when the Republicans are unreasonable. But I was pleased to see that in their latest editorial they have noted that the Republicans are accomplishing nothing with the government shutdown. Here is an excerpt:
WHAT HAVE House Republicans managed to accomplish in a week of government shutdown?
Damage the livelihood of millions of Americans? Check. . . . Waste billions of taxpayer dollars? Check. . . .Interfere with key government operations? Check. . . .
Rattle the markets, slow an economy in recovery, interrupt potentially lifesaving research at the National Institutes of Health? Check, check and check.
Derail the hated Obamacare? Ch . . . — oh, no, wait a minute . . .
And while the Editorial Board does seem to think that the Democrats will ultimately need to give the Republicans a lifeline (a little something so that they will end the shutdown), much to my surprise, the editorial board has indicated that now is not the time for the Democrats to compromise. At the conclusion of the editorial they state:
But throwing a lifeline is pointless until the victim realizes he may be drowning. It’s not clear the Republicans have reached that point. The danger is they will take the country down with them.
I am glad that after years of hearing from the mainstream media like The Washington Post that both sides are to blame, that finally they appear to be waking up to the fact that the Republicans are the ones to blame.
Posted by FourScore | Mon Oct 7, 2013, 11:14 PM (9 replies)
Mon Oct 07, 2013 at 06:16 AM PDT
Mr. Boehner, we triple-dog dare you
by Barbara Morrill
On Sunday, Speaker of the House John Boehner made an astonishing claim:
STEPHANOPOULOS: ... I take it from your answer that you're not prepared to schedule a clean bill on government funding.
BOEHNER: There are not the votes in the House to pass a clean CR.
Baloney. There are more than enough Republicans who have said they would vote for a clean continuing resolution that would immediately end the disastrous Republican shutdown of the government. And the only thing keeping that from happening is John Boehner's cowardly refusal to buck the tea party wing of his caucus.
So we double dare you. We double-dog dare you. In fact, we triple-dog dare you. Lick the frozen pole and prove your tongue won't stick.
Posted by FourScore | Mon Oct 7, 2013, 12:41 PM (2 replies)
Watch This for 22 Seconds and You'll See Why Obama Can't Give an Inch
BY JONATHAN COHN @citizencohn
The key exchange takes all of 22 seconds, starting at about 12:25 in the video above. It goes like this:
STEPHANOPOULOS: What the president says is he believes that the consequences of negotiating again over a debt limit and re-creating a cycle of crises are worse.
BOEHNER: Every president in modern history has negotiated over a debt limit. Debt limits have been used to force big policy changes in Washington. And guess what, George? They're going to be used again.
Boehner is wrong on the history. Congress has increased the debt limit in the course of passing other legislation—the Center on Budget and Policy Priorities has a nice review of recent legislation—and sometimes one or the other party made a big fuss about it. But, as Thomas Mann and Norman Ornstein explain in their acclaimed book, It’s Even Worse Than It Looks, until recently officials in neither party seriously threatened to let the government default on expenses it had already incurred:
Pyrotechnics and symbols aside, on every occasion on which the government needed to raise the debt ceiling, the key actors in Washington, including presidents and congressional leaders, knew that almost nobody—until now—had any intention of precipitating a default. Leaders of the president’s party told us privately on the eve of more than one ostensibly nail-biting vote, including in 2002, that they knew in advance that their counterpart’s members, along with some of their own antsy colleagues, were willing to switch if it looked as if the debt limit vote might actually fail with the deadline looming.
Eventually, the authors note, leaders from the two parties started invoking what became known as the Gephardt rule (named for Richard Gephardt, former Democratic leader in the House). Under the Gephardt rule, the debt limit went up just as soon as the budget resolution passed. But Republicans repealed the Gephardt rule in 2011, right after taking power. A few months later, they were threatening to allow default if Obama didn’t meet their demands.
Posted by FourScore | Mon Oct 7, 2013, 12:31 AM (19 replies)
The Factoid That Explains Why You Want to Live in a Blue State
BY MICHAEL SCHAFFER @michaelschaffer
How much of a difference does living in a Democratic-run state make? Here's the difference between what a family of three—a working parent with two dependants—would have to make in Minnesota and Alabama in order to qualify for subsidized insurance. Meaning: In Alabama, a family that brings in as little as $3,500 a year is out of luck. In Minnesota, the country's most generous state, that family can get help if their income is up to $40,000.
A key difference: Minnesota has the country's most generous Medicaid eligibility rules. Alabama, on the other hand, makes it almost impossible for the working poor to get Medicaid. And now it is among those states refusing to participate in the Affordable Care Act's expansion of Medicaid. As a result, a low-income family of one adult and two children wouldn't benefit from the new law unless its income is above the poverty line, which would be about $19,500 a year. At higher incomes, the family would become eligible for subsidies in the new federally run exchange—money that state officials have no power to reject, as Alabama's have. In other words, if your 2014 income is between $3,500 and $19,500, you're out of luck.
The American Prospect's Paul Waldman created a handy chart that lays out the red-blue differences across the country in 2013. Our numbers, above, come from the Kaiser Commision on Medicaid and the Uninsured's projections for 2014. And while it's true that Minnesota is an exceedingly generous outlier even by blue, northern standards, Alabama is in good company at the ruby-red bottom of the chart.
Posted by FourScore | Sun Oct 6, 2013, 11:57 PM (9 replies)
Sat Oct 05, 2013 at 03:21 PM PDT
Vanity Fair's Blockbuster Part 2 in Obamacare series: The truth!
by Fokozatos siker
Last week, Vanity Fair ran a devastating and brilliant piece ripping apart the Republican lies (yes, they called them lies) about Obamacare. Kurt Eichenwald, the contributing editor who wrote the piece, promised in it that this week he would be coming back with another one on the truth about Obamacare.
And boy, did he. Here is part 2!
This one isn't the laugh riot of last week, because as Eichenwald makes clear, defanging lies is a lot easier and a lot more amusing than explaining truths. But what he hass written is the most comprehensive, clearest and impossible to dispute detailing of Obamacare that I have ever seen. If you have a tea-partier or Republican in your family, hand them the piece and give them some knowledge. More below...
What is so compelling about the new piece is it is not a bunch of the statements we already know on the benefits, like no pre-existing condition restrictions, no insurance caps, etc. Instead, Eichenwald goes in a completely different direction.
He starts off with a lament that I think we don't express enough: That talking about the life-saving benefits for the uninsured seems to be an insignificant issue for too many Americans.
Normally, I would start this discussion by providing chapter-and-verse details about the 47 million men, women, and children who now have the opportunity to obtain health insurance, to live longer and healthier lives, to avoid needless bankruptcies. But, in what to me is one of the saddest developments in our nation’s history, that reality is irrelevant to ardent Obamacare opponents....These days, I have to start by answering the question “What’s in it for me?”
And answer he does. He begins with the clearest of points that too often is ignored: the uninsured get health care, whether they have insurance or not.
This is the fundamental issue that too many people do not understand. There seems to be this belief among some that those who are uninsured simply go off and die somewhere, thus having no impact on the medical-care-delivery system in the United States. But the opposite is true—the uninsured have some of the most dramatic effects of any group on our nation’s health-care system...In fact, the uninsured affect the finances, quality of care, and availability of medical assistance to every person in a community, regardless of their insurance status.
Then, he presents the most amazing numbers I've seen in this debate: The PRECISE amount the uninsured are costing those with insurance. He begins with the national average (he gives for two years, I'll use the 2010 estimates.) That amount: $1,502. That is not the premium - that is the EXTRA premium that the insured are paying to compensate for the bills the uninsured are unable to pay.
Even more fun, the piece then shows that the highest amount in extra premium is being paid by, you guessed it, the states that are the biggest opponents of Obamacare:
It is the citizens of states most opposed to Obamacare and who are refusing expansions of Medicaid who are taking the biggest shellacking: Texas residents are paying $2,786 more in premiums for family policies provided through employers. Montana, $2,190. Alaska, $2,248. Idaho, $2,152. North Carolina, $1,828.
I've already started reciting those numbers to some friends who have bought into the Republican lies. Their only response is "splutter."
Then Eichenwald points out something I never knew. Those communities with the highest numbers of uninsured have the lowest quality of care, not just for the uninsured, but for the insured as well.
Follow the logic. Hospitals don’t have poverty wards; if a patient comes in the door in bad shape, they don’t do a wallet biopsy before deciding what care that person should receive—everyone at a hospital receives the same quality. But if a community has a higher number of uninsured, that means the latest and greatest technology and treatments will drive up the amounts of unreimbursed care. In essence, hospitals that provide the best, most modern, and most expensive treatments in an area with lots of uninsured will be forced to pass unsustainable amounts of cost to their prices. Insurance companies won’t pay it, local governments won’t finance it, and the hospitals will go out of business. The only option then? Don’t provide the top-quality care to anyone—insured or not.
Eichenwald then immediately acknowledges that people might not believe the logic, and so cites multiple studies proving he's right.
It is only after this lengthy description of medical economics that Eichenwald returns to the benefits to the uninsured.
With the “what’s in it for me” question regarding the benefits of covering the uninsured, now let’s go to the price they pay for being without health insurance. This one is as simple as screaming “death panels”: the uninsured die. As the Texas health-care task force reports: "Overall, the uninsured receive less preventive care, are diagnosed at more advanced stages of disease, and once diagnosed, receive less therapeutic care than do the insured. Thus, lack of adequate insurance leads to premature death." Hopefully, those words are easy enough for everyone to understand. If Republicans truly are dedicated to the sanctity of life, they should be the first ones on the front lines trying to get policies for the uninsured.
This is as much as I can quote and still stay within fair use. But it is a long, long article loaded with powerful facts, figures and arguments. Before you have another arguments with the deluded, just print it out and hand it to them. It was exhilarating to read!
Posted by FourScore | Sat Oct 5, 2013, 11:13 PM (2 replies)
Revocation of Independence
29 November 2011 – 10:30
Posted in Humor, Law and Politics
In a fit of anger her majesty Queen Elizabeth II issued the following letter to the citizens of United States of America
To the citizens of the United States of America from Her Sovereign Majesty Queen Elizabeth II
In light of your failure to financially manage yourselves and inability to effectively govern yourselves responsibly, we hereby give notice of the revocation of your independence, effective immediately. (You should look up ‘revocation’ in the Oxford English Dictionary.)
Her Sovereign Majesty Queen Elizabeth II will resume monarchical duties over all states, commonwealths, and territories (except Kansas, which she does not fancy).
Your new Prime Minister, David William Donald Cameron, will appoint a Governor for the former United States of America without the need for further elections. Congress and the Senate will be disbanded. A questionnaire may be circulated sometime next year to determine whether any of you noticed.
To aid in the transition to a British Crown dependency, the following rules are introduced with immediate effect:
MORE ON HER MAJESTY'S DECREE: http://itzhakts.wordpress.com/2011/11/29/revocation-of-independence/
Posted by FourScore | Sat Oct 5, 2013, 04:31 PM (3 replies)
Posted by FourScore | Fri Oct 4, 2013, 12:23 PM (20 replies)